200% Rule / 95% Rule
If you identify more than three, then you will be subject either to the 200% Rule and possibly to the 95% Rule. The 200% Rule requires that the combined values of all of the properties you identify cannot exceed 200% of the sale price of your relinquished property. If it does, then you will be subject to the 95% Rule, requiring you to close on the purchase of 95% of the combined values of the properties you identified (in most situations this will require that purchase every property you identified in order for your exchange to succeed). You will not be subject to these two rules if you identify three or fewer replacement properties.
Guidance on describing replacement property for exchange identification purposes suggests it is identified only if it is described unambiguously and in writing. If you are buying an undivided interest as replacement property (instead of the whole property), you might consider identifying only the percentage of the property being acquired. Alternatively, you can describe the undivided interest as a dollar value instead of a percentage. Identifying undivided interests can be tricky and, if you will be doing it, it is a good idea to tell your QI before the 45-day deadline.
Strategic 1031 Exchange Advisors, LLC, a Georgia limited liability company, is a qualified intermediary for 1031 exchanges only. It is not an accounting firm, law firm or registered investment professional and therefore is not qualified to give accounting, tax, legal or investment advice, and, further, cannot act in an agency capacity on behalf of its clients. This website is for informational purposes only and does not and is not intended to constitute accounting, tax, legal or investment advice. We advise you to consult with your accountant, attorney and investment professional on all matters related to your exchange.